For Millennials, It's Apps More than AccelerationBy Dale Buss February 23, 2011
Joe McFarlane just moved from Cincinnati to Detroit to become part of the cutting edge of automotive marketing: selling to the newest buyer segment, Millennials. The Procter & Gamble executive signed on as General Motors point man for appealing to the 75 million Americans who were born between 1977 and 1998.
Hes a senior-level guy, an incredible young marketing mind, who we hired away from P&G, and his entire job is to crack this nut and answer how we market to Millennials, said Joel Ewanick, GMs global chief marketing officer. And we are so knee-deep in this. Were having lots of meetings, and were working with some really cool companies to help us with this. Its a huge initiative for us.
Indeed, there can be no bigger long-term priority for the auto industry in the United States than figuring out the preferences of Millennials, a powerhouse demographic cohort also known as Generation Y, and Echo Boomers which is about the size of the previous most populous: their parents, the baby boomers. Because Millennials represent such a huge portion of the potential car-buying American public for the next few decades, manufacturers must successfully address their needs, wants and turnoffs to convert todays nascent recovery into solid long-term growth.
Theyre hugely significant in terms of raw numbers alone, said Sage Marie, Hondas manager of product planning in the U.S. Capturing their business and ensuring their loyalty is crucial for the future.
Breaking the Mold
Millennials also have proved to be the first generation to defy the auto-industry marketing wisdom of at least half a century. Now of driving ages from 16 to 33, Millennials tend to be less interested in driving per se or in the traditional attributes of automobiles, especially power, and more interested in the environmental credibility of vehicles and in their emergence as rolling platforms for owners cell phones, iPods and other infotainment devices. Theyre less inclined to get a drivers license as soon as they can, said Larry Dominique, Nissans vice president of advanced and product planning in the U.S. Theyre looking at vehicles more from a practical than an emotional sense.
Millennials are marked by other differences from preceding generations, too. They may end up worse than the previous generation from a net-worth standpoint, noted George Rogers, president and CEO of Team Detroit, Fords advertising consortium. And theyre more socially concerned, about the environmental aspects of vehicles.
Here are some of the ways Millennials are compelling and confounding auto companies:
The entire society is adjusting to Millennials fierce devotion to electronic connectedness, and automakers are trying to come up with a role for their vehicles that will accommodate the generations priority -- and certainly not thwart it. Theyre connected before they get in their car, and when they get in their car, theyre worried that all of that has to be put on hold until they get where theyre going and they can get reconnected, Marie said. So its incumbent upon us to make sure the car integrates seamlessly with their lives so their lives dont get put on hold when they get into the car.
Richard Wallace said that what theyre looking for is different. The director of transportation systems analysis for the Center for Automotive Research explained that boomers may have haggled over the engine. But [Millennials] are more interested in, Can I link this to the internet, and use this kind of screen, and bring my music in and have it play through the system?
As Dominique put it, As smartphones get smarter and peoples lives all end up on these tiny devices, theyre wanting to just hop into the car with this phone and have it communicate with everything.
The priority placed by Millennials on infotainment already has sent automakers scrambling to please them over the last several years. And the manufacturers that are doing the best job so far are reaping rewards in the marketplace. The best example is Ford. The company stole a march when it introduced Sync a few years ago, along with Microsoft, because they designed the feature as a flexible interface to support whatever mobile devices are brought into the car -- rather than as an attempt to impose a hard-wired platform on the driver, as was the basic approach behind General Motors OnStar system.
As a result, consumer take rates for Sync are at least two out of three even in small models such as Focus and Fusion, whose reasonable price points reflect their status as somewhat basic transportation. And Fords biggest gain in market share over the last two years has been among Millennials, said George Pipas, the companys head of U.S. industry analysis.
Other automakers are scrambling to catch up. GM just announced the launch of Chevrolet MyLink, a Sync-like system, beginning with the Volt later this year. And Kia is introducing a voice-controlled infotainment system called UVO (stands for Your Voice), based on technology the Korean brand developed with Microsoft after the exclusive Sync partnership between Ford and Microsoft expired. Theyll be able to bring in PDAs, USBs, iPods or whatever, and control it all through voice commands, said Michael Sprague, head of U.S. marketing for Hyundai.
The notion of Little Deuce Coupe becoming a hit song with Millennials today, as it was for their boomer parents in 1963, is laughable, because their relationship to and with cars is very different. They care about infotainment technology more, and the thing they care about less is that whole culture of gasoline and horsepower, Rogers said. Eric Wong, a manager in Mazdas product planning and strategy group, said that theres less emphasis on straight-line speed and horsepower, and its more cool to get a car that is more fuel-efficient.
Styling remains important to Millennials, and theres a huge customization trend among young buyers that bespeaks their interest in parts of the automobile other than the UBS port. Customization up and down the line is key to winning over this generation, and its not just a matter of connectivity, Wallace noted.
But another aspect of Millennials is theyre less involved emotionally with the very notion of a vehicle. This trend is advanced in Japan, said Nissans Dominique. The United States is not anywhere near that, and it will be a long time before we are, he said. But there are signs that we are chipping away at the emotional side of cars. Marketing of Nissans Leaf is an example of the trend: Leaf has an emotional appeal to Millennials, but mainly because of its extreme environmental friendliness. And Nissan has been promoting an onboard telematics system that, among other things, continually updates the driver on the Leafs remaining battery range and on the closest charging stations.
Nevertheless, said Hondas Marie, Millennials want a vehicle that is fun and expresses their personality. In some ways, theyre the same as previous groups of young car buyers. Overall, said Eric Wong, a manager in Mazdas product planning and strategy group, We still believe that there is zoom-zoom in how Millennials connect with their vehicles and that it can be delivered in how they drive their cars and how theyre emotionally connected.
Millennials demonstrate less raw enthusiasm for driving than any generation since the popularization of the automobile. The notion of camping out in the parking lot of their local Department of Motor Vehicles office on the eve of their sixteenth birthday, as many of their parents did, is alien to most in the new generation. Several tendencies of Millennials feed this trend.
First is the impatience they can demonstrate with the auto-industry new-product cycle because of how theyve been spoiled by quick turnover in consumer electronics. With a phone, they replace it every year, Wallace said. What are their reactions when they have to spend so much more on a car and then are expected to keep it for six to eight years and then trade it in?
Millennials resistance to the technological obsolescence of vehicles is behind the bet that some aftermarket companies are placing. Parrot, for instance, has introduced a line of aftermarket connectivity kits. There are around 50 million used cars that dont have connectivity, said Christian Coly, a vice president of Southfield, Mich.-based Parrot. The companys $299 kits can be a real differentiator for dealers. Another factor in Millennials relative lack of appreciation for cars and driving is that, "teens are able to connect in so many other ways than physically, Hondas Marie noted -- especially through their mobile phones..
Yet, because friends tend to be important to them, Millennials spend a lot of time in vehicles as passengers, not as drivers. They tend to travel in packs, Sprague said. This trend has even prompted some American municipalities to pass ordinances regulating how many pre-adult individuals can be in a vehicle. And as generations of young people before them, adult Millennials tend to cluster in big cities, where mass transport is usually available. Also, they are entirely comfortable with an innovation newly available with their generation: car-sharing services such as Zipcar.
Yet, as Rogers noted, Theres an emotional aspect to vehicles, of freedom and just getting out and escaping, and that continues to be a fundamental magnet for vehicle purchase. And, he added, in most metro areas of this country, public transportation remains an inexact science. There remains a real, pragmatic need for vehicles. Were all just trying to figure out, What is the definition of a vehicle in their lives today?
Of course, Millennials must be approached differently when it comes to the experience of marketing and selling autos as well. For one thing, their primary orientation is becoming social media. Introducing new vehicle through Facebook is the new test drive, argued Liz Vanzura, chief marketing officer of MMB Advertising, Boston, and Cadillacs former CMO.
Kia is addressings this in part by using about two dozen different icons at the end of its TV commercials, which quickly communicate to graphics-savvy Millennials the features of the vehicle, such as a panoramic sunroof. That communicates to them something about the vehicle better and more quickly than a voiceover, Sprague said. They see icons and know what they mean because thats the world they live in.
But Millennials fresh orientation also extends into the purchasing experience. Fiat, for example, may steal a march on better-established competitors in how it approaches this issue. Not only is the company unconcerned about the fact that the Fiat brand failed in the United States 35 years ago Millennials werent even alive then but also Fiat is tilting its retail approach toward this burgeoning generation. Fiat wants Chrysler dealers who sell the new Fiat 500 to use no-haggle pricing.
This generation just despises the concept of going to haggle with a dealer, said Wallace, who is based in Ann Arbor, Mich. They ask, Why isnt the price just on the car? Ewanick said that GM now is focusing heavily on the fact that Millennials are looking for a different kind of shopping experience, without getting more specific.
Spoiled or Despoiled?
This is the generation that is staying at home with their parents longer than any Americans before them, including many who have personal incomes of as much as $100,000 a year. That is illustrated by the fact that one of the most popular provisions of the Obamacare health-care legislation passed in 2010 was parents could keep their offspring who lived at home on their health-insurance policies until age 26.
Im a boomer, and we grew up in a generation where when you turned anywhere from 18 to 21 years old, your dad kicked you in the butt and said you were out on your own, Dominique said. But boomers relationship to their own children is very different much closer so parents arent in a hurry to have Millennials move out. The new generation grew up with computers and minivans and iPods, and they also grew up wanting nothing because they had everything.
For automakers, this trend creates uncertainties. Its influencing vehicle-purchase behavior because a lot of Millennials are saying, I dont have to buy a fancy car or one Im attracted to emotionally, because I can always borrow Mom and Dads.
Yet Millennials face unique economic challenges: Economists roundly assert they are the first generation of Americans who cannot count on their collective economic achievements exceeding those of their parents. For one thing, the current unemployment rate among Millennials is about twice the national average of 9 percent, financially disadvantaging vast ranks of this cohort just as many of them are reaching the traditional age of first car purchases. Theyre almost all of driving age by now, but a lot of them still arent in the (automobile) market because of the economic conditions, Hondas Marie said.
Millennials ability to start moving forward economically has been retarded, Dominique said. Their purchasing power may be extremely big later, but theyre not following the growth timeline that boomers or Gen Xers followed. So there are a lot of open questions. One of them is, if theyre delaying leaving home for financial reasons, are they leaving home when they do with a lot of money in the bank? Were not sure yet.
Yet, automakers that address this reality may resonate with Millennials. Theyve been deeply impacted by the recession and by whats happened to their parents, Kias Sprague said. For us as a value brand, we should be well-positioned with them in the long term as long as we continue to offer great value.
Millennials may be the most technologically attuned generation of Americans yet, but the growing establishment of driver-distraction laws is pretty squarely aimed at frustrating their sometimes-disturbing behavior behind the wheel.
Theyre probably more willing to be distracted than other drivers, Dominique said. They dont want to be constrained. So well have to make the cars technology architecture more flexible. For example, he said, automakers are working on voice-recognition technology that is effective with more casual conversation with the driver.
At the moment, this dilemma is vividly illustrated by the differing approaches that automakers are taking to whether to allow social-media interaction on their infotainment systems. So far, for example, Ford has said no to allowing Sync users to, for example, update their Facebook status while driving. On the other hand, GM has famously taken the opposite tack, as in its Super Bowl commercial in which a Millennial Chevy driver got a voice-converted message via Facebook indicating that he was a hit within a minute or two of leaving his date at her front door.
Fords Connelly that well see do-not-disturb buttons around the driver. But weve had people say that, if given the choice between not being connected in a car or being connected somewhere else, theyll take the train or subway or bus. Thats more important to them.
Team Detroit's Rogers says he believes that with all these sensors around a car, were eventually going to have one that drives itself. Youre going to be able to do a lot more in the car than people think. So, to Millennials, we need to provide a much more relevant experience for them so that we can keep the vehicle as a must-have in their lives.